Mitchel Baker, head of the Mozilla foundation, has presented the financial results for 2007 [blog.lizardwrangler.com]. The results reveal that revenue and expenditures are both up by more than 30%. More than 90% of revenue was directly from Google.

Their substantial profits and business relationship with Google has attracted an IRS (US Internal Revenue Service) investigation, which is still ongoing:

In 2005 the Mozilla Foundation established a "tax reserve fund" for a portion of the revenue the Foundation received that year from Google. We did this in case the IRS (the "Internal Revenue Service," the US national tax agency) decided to review the tax status of these funds. This turns out to have been beneficial, as the IRS has decided to review this issue and the Mozilla Foundation. We are early in the process and do not yet have a good feel for how long this will take or the overall scope of what will be involved.

Honestly, I've been a big advocate of abolishing our tax system as it exists today. It's nothing but a massive hinderance to both companies and individuals. Such an innovative country, with such an atrocious system and record of approaching it in this department. I really wish we had a progressive consumption-based tax system. Of course, the wealthy - whom control the tax system - will never allow that to happen, because the lavish expenses they make would no longer be tax deductible. For shame!

"a progressive consumption-based tax system" So each time I buy a soda I have to bring my 1040 with me? -walkman

I don' think we'll be rewriting the U.S. tax code here, and the turn in the topic takes away from the OP report, which should be more interesting to webmasters, Adwords and Adsense participants, and every-day web surfers who use FireFox, DMOZ and other Mozilla tools and services.

$75 million in revenue in 2007, the "vast majority" of it from a search partnership with Google

I am wondering if the FireFox browser sets a cookie or otherwise provides tracking from a Mozilla browser? I would assume it has to for "ad-revenue sharing [with Mozilla foundation]". $75M is a lot of clicks...

If so, what other possible data may Google collect from use of the FireFox browser, the DMOZ project, and other Mozilla based tools and services

Is there any news anywhere of "Mozilla earns $75million as an advertising partner for 2007"?

While anti-trust laws can openly scrutinize above board deals and possible anti-competitive, non-consumer friendly dealings of public companies, "backroom deals" are usually undertaken to gain some sort of unfair advantage...

Everyone cried foul when MS sought to integrate MS-IE into the OS in a way that excluded other browsers, as it made it difficult for anyone to choose any other browser. The effect was obvious: it gave MS a virtual monopoly on internet access from any MS/OS based PC, which at the time was probably +96% of the market.

If this story is true, than it appears "Mozilla" is bought and paid for by Google, and has been for some time, although not openly.

My questions would be:

1. Did Mozilla foundation make data from DMOZ more readily available to Google (than others including SE's).

2. Did Mozilla give Google preference in it's FireFox browser for monetary gain? (The answer appears to be "Yes", as Google is the default search engine from the browser's toolbar).

3. Did Google influence the development of any of the other Mozilla based tools in a way that either gave Google preference, or diminished any other SE's ability to integrate with Mozilla software or service on a "level playing field"?

4. Does Mozilla cooperate with Google in any way to provide user data, (from FireFox, DMOZ or any other Mozilla tools or services) ?

The click-throughs from Google ads shown as a result of Firefox's default search box, show up at Google with a Firefox ID in the QUERY_STRING. This, plus the fact that the income from Google to Mozilla Foundation since 2004 is variable, strongly suggests that Mozilla is getting a percentage of the Google ad revenue. In addition to the default search box set to Google, Mozilla prefetches the top result from Google searches. And if the URL entered in the address bar cannot be parsed as a URL, Firefox asks Google for its best guess and displays that page. Google also hypes Firefox on its own site.

The details of the contract between Mozilla Foundation and Google have not been made public, but no doubt the IRS will get a copy -- with a subpoena, if necessary.

While Mitchell Baker underplays this issue, the fact is that the Foundation treated the Google revenue from 2004 and most of 2005 as Foundation services that are related to the Foundation's exempt function and purpose. By 2006 they decided that the term "royalties" sounded safer than "search revenue" in describing the same income source. In both cases it seems likely that it should have been declared as "unrelated business income" (UBI).

If the IRS requires a UBI reclassification for 2004 and most of 2005, then the result of this will be that the $14.8 million held by Mozilla for this contingency will be collected by the IRS. Plus there will be penalties, and California can also collect tax on these amounts.

A reclassification to UBI means that the Mozilla Foundation's claim that its public support meets certain standards will suddenly fail, since the UBI revenue is now entered into the equation and dramatically changes the percentage of claimed public support. At this point the Foundation may be considered a private foundation instead of a public charity, and be subject to a two percent tax on its net investment income. That would amount to about $100,000 a year.

From the end of 2005 until today, the Google revenue has been handled by the Mozilla Corporation, not the Mozilla Foundation. The Corporation, which is wholly owned by the Foundation, pays taxes and was created specifically because of this tax problem. Therefore, the main issue is the way the Foundation handled the Google revenue in 2004 and most of 2005. However, the IRS is looking at both the Corporation and the Foundation, and according to the independent auditor's combined report, is also challenging certain deductions on the Corporation's tax return. The salaries are now paid by the Corporation too. According to the Foundation's IRS Form 990, Mitchell Baker received nearly $570,000 in salary and benefits in 2006, and the same amount again in 2007.

Documentation for all of this is available at the bottom of s-c-r-o-o-g-l-e DOT org/mozilla.html

I may be wrong, it's been a while, but doesn't FF attempt very hard to have new users go with Google as the default search?

That, to me, seems worth 10x the 75 million Mozilla is reporting as income given that FF has become dominant. Mozilla was smart to save the money but something doesn't seem right after reading that release.